Eagle Mine to be sold

Lundin Mining to develop and operate mine as planned

June 13, 2013

HUMBOLDT - Eagle Mine officials were scheduled to hold an all-employee meeting this morning to discuss details of the sale of the mine and Humboldt Mill, announced late Wednesday, to Toronto-headquartered, base metals mining company Lundin Mining for $325 million.

The new owners intend to develop and operate the mine as planned and will advance exploration efforts to identify additional resources nearby. Rio Tinto had previously identified several mineral exploration targets.

"We believe Eagle will have a sound future under its new ownership given Lundin's commitment to the development of the project," said Chris Lynch, Rio Tinto chief financial officer. "Rio Tinto will continue to manage Eagle to the highest safety and environmental standards during the transition to the new owner."

The sale - which includes the underground copper and nickel Eagle Mine, the Humboldt Mill and the mineral, water, access and surface rights around the mine - is expected to close next month and includes a $250 million purchase amount, plus project expenditures of roughly $75 million incurred from Jan. 1 through the sale closure.

Rio Tinto spokesman Daniel Blondeau said the sale is subject to customary U.S. regulatory approvals.

"Rio Tinto will continue to manage Eagle while the regulatory process is completed, which is expected to take approximately six weeks," Blondeau said. "Once the regulatory process is settled, Lundin will take over day-to-day management of Eagle."

Mine production is expected to begin in late 2014 and once it starts, the mine will generate up to 2,000 tons of ore each day.

The Eagle Mine management team will remain in place at least until the sale is closed and the mine's 68 current employees, 42 of whom are local residents, will become workers for Lundin, Blondeau said.

"The people that are working with Rio right now, that's part of the sale as well," Blondeau said. "So Eagle employees will be transitioning with the project to Lundin."

Blondeau said it's too early to tell whether the number of direct mine or mill employees will increase under the new ownership, but in the short term, there will be new jobs available with construction projects remaining to be completed at the mine and mill.

Blondeau said the sale is good news.

"Eagle is still going to be built and operated, we're still going to be providing the jobs, the taxes and all the other benefits that the community was expecting from the mine," Blondeau said. "So we're excited to get things up and moving, for construction to ramp up."

In February, Rio Tinto announced it would "moderate" the pace of construction at the mine and mill in response to "economic headwinds" and volatility in commodities markets. Those construction projects previously put on hold will now be accelerated, Blondeau said.

"It is a fairly big change," Blondeau said. "We've been in this moderated construction pace for a while now. But real soon here, starting next week, people will start to see things ramp up."

Bids will be let for the mining during operations and the ore transportation and for three structures to be built at the mine, including an above ground ore storage building, a batch plant to mix aggregate and concrete for backfilling the mine and an aggregate storage building.

"At the mill, the mill has pretty much been cleaned up and gutted at this point, but now we really have to start putting the equipment in and building the other facilities out there for operations," Blondeau said.

The total capital expenditure for the Eagle Mine-Humboldt Mill project is estimated at $770 million. Lundin officials said $355 million of that had been spent by Rio Tinto as of May. In addition to the $325 million price to acquire the mine, Lundin is expected to spend another $400 million through 2014 to bring the mine and mill into production.

Construction at the mine is 80 percent complete, with the project overall - including the Humboldt Mill - about 55 percent done.

Marquette County Road Commission construction projects begun recently to upgrade county road 550, 510 and the Triple A Road - funded by Rio Tinto - are expected to remain on schedule, serving as a portion of the transportation route between the mine and mill.

Officials with Rio Tinto and Lundin Mining said the sale of the mine and mill will be beneficial to both companies, which have been making moves to adjust to shifting global market conditions.

Lundin - which has other operations in Portugal, Sweden and Spain and holds a 24 percent equity stake in a copper and cobalt mine in the Democratic Republic of the Congo and a cobalt refinery in Finland - previously purchased two other Rio Tinto mines, including a copper and zinc mine in Portugal and a zinc, lead and copper mine in Sweden.